The Work Force
- Cecilie 🇩🇰
- 1. sep. 2016
- 1 min læsning
Terms
⭐️ External costs are the costs that are imposed onto society
⭐️ Internal costs are the costs that the business includes
⭐️ Profit maximization is the principle that controls how the businesses act: Costs have to be as low as possible and the profit as high as possible.
⭐️ Sorting mechanism: The price of the goods sorts who are able to buy the goods – not everyone can afford the good.
Even though a lot of countries have set a minimum wage there are still big wage gaps because
The supply of people with high educations < the supply of people with low educations.
The market mechanism gives us answers to the following questions:
What should be produced?
The products that the consumers want (recall: consumers utility maximize)
How should the products be produced?
In a way that minimises the costs and that uses the resources as efficiently as possible (recall: businesses profit maximize)
What should the price be?
A price that the consumers are willing to pay for the product. Competition → the price does not get too high.
❗️ The market mechanism ≠ fair